The investment case for railway stocks continues to strengthen as public capex remains the government’s primary growth lever. In the Union Budget 2025, total capital expenditure stood at ₹11.2 lakh crore, with infrastructure spending taking center stage. Of this, ₹2.6 lakh crore was solely allocated to railway capital expenditure.
Beyond this increase, railway capital expenditure has doubled from around ₹1.1 lakh crore in 2021-22 to ₹2.6 lakh crore in 2025-26. Also, allocations have remained consistently elevated, suggesting that railways are no longer a cyclical budget theme but a sustained capex pillar.
The expansion of the National Infrastructure Pipeline to 13,247 projects reflects a long-term commitment rather than a one-off budget push. This aligns with the National Rail Plan, highlights the shift toward capacity expansion, network modernization, electrification, and freight efficiency.
Also, Indian Railways is estimated to require investments of ₹35.3 lakh crore by 2032. Against this backdrop, expectations from the Union Budget 2026 remain constructive. Per media reports, which Financial Express could not verify, the railway budget allocation is expected to increase by 10% in Budget 2026-27.
Let’s look at three Railway companies expected to benefit from the increase in the railway budget.
#1 Titagarh Rail Systems: A Duopoly in the Making?
Titagarh Rail (TRSL) is an Indian engineering company. It holds the distinction of being the only Indian company to manufacture both freight wagons and passenger coaches. It has diversified business segments, including Freight Rail, Passenger Rail, and Shipbuilding. The company is also expanding into defence.
TRSL has an installed capacity to manufacture 12,000 wagons per year. It commands about 25% market share in wagon manufacturing. While the capacity stands at 1,000 wagons per month, the company plans to maintain a production run rate of 800 to 850 wagons per month to even out workflow pending new railway tenders.
Building Trains, Locking Annuities
In addition, the company has the capacity to produce 300 coaches per year. It also possesses the capacity to build 16-18 vessels per year.
In the passenger rail systems, TRSL is involved in the design and manufacturing of Vande Bharat Sleeper trains, which include a 35-year Annual Maintenance Contract (AMC). The first train delivery is targeted for Q3 of the next financial year.
TRSL is also executing orders for several major metro lines. The company is manufacturing the first and only aluminium-bodied metro coaches in India for Pune Metro. Production for these aluminium car bodies is scheduled to begin in Q1 of FY27 at the Uttarpara plant. In fact, it has a confirmed order book up to FY28 for metro coaches and up to FY31 for Vande Bharat trains.
In late 2025, TRSL received a Letter of Acceptance (LOA) for the Mumbai Metro Line 5, valued at ₹2,481 crore. It also holds the mandate for Line 6. The first train for these lines is expected to be delivered in Q3/Q4 of FY27. The company is also executing orders for the Surat and Ahmedabad Metros (stainless steel bodies) and the Bangalore Metro.
The company views service contracts as a high-growth area. For instance, the Mumbai Metro contract includes a 15% service component, and Vande Bharat includes a 35-year maintenance period. These services typically yield high margins of 20% to 30%.
Backward Integration: The ABB Agreement
The company is backward integrating by manufacturing traction motors and converters. It has a technology transfer agreement with ABB and aims to introduce its own proprietary propulsion system within 2-3 years. Beyond this, TRSL is also a beneficiary of the rising demand for freight wagons.
The Freight-to-Passenger Pivot
TRSL has formed a joint venture with Ramkrishna Forgings to set up a wheel manufacturing facility in Chennai. This facility is expected to become operational in Q1 of FY27, providing an earnings trigger. TRSL has also applied for a wagon leasing license to gain market share in the private sector and capitalize on potential maintenance opportunities for leased wagons.
Management remains optimistic about future demand, citing Indian Railways’ target to increase traffic from 1.6 billion tons to 3 billion tons by 2030. This will drive both replacement and new wagon demand. New tenders are expected by Q1 of the next financial year.
In the defence segment, it has delivered over 35 vessels to clients such as the Indian Navy and the Coast Guard. It recently secured an order worth ₹445 crore from Garden Reach Shipbuilders & Engineers for two vessels. The shipbuilding business is being spun off into a separate entity to allow it to raise its own capital and grow independently.
Deciphering the 8-Year Revenue Visibility.
As of 30 September, 2025, the standalone order book stood at approximately ₹15,077 Crores, while the share from JV was ₹13,326 Crores. This provides revenue visibility of over 8 years, as per the trailing 12-month (TTM) revenue of ₹3,386 crore. While the order book is robust, execution remains a challenge.
Revenue in H1FY26 declined 22% year-on-year to ₹1,462.32 crore, primarily due to supply chain constraints in the freight segment. The company reported an EBITDA decline 29.8% to ₹165.81 crore, while the margin contracted from 12.59% to 11.34% during the said period. As a result, profit after tax (PAT) fell by 40.4% to ₹96.7 crore.
#2 Rail Vikas Nigam: Transitioning to High-Margin Service.
Rail Vikas Nigam (RVNL) is a Public Sector Undertaking strategically transitioning from legacy railway projects to a diversified portfolio. This includes manufacturing Vande Bharat Train Sets, which also involve maintaining the trains for 35 years. Two prototypes are scheduled for delivery in June 2026 and August 2026.
Beyond the Tracks
Following prototype testing, 12 train sets will be produced in FY26/27, followed by 25 sets annually for the next five years. Existing maintenance sheds are being upgraded to handle these train sets. RVNL has entered the Multimodal Logistics Parks sector in collaboration with National Highway Logistics Management, with four parks currently undergoing operationalization.
The company is exploring opportunities in solar power combined with battery storage systems. RVNL is bidding for Hybrid Annuity Model projects, particularly in roads, which offer steady revenue streams over long concession periods (20–25 years). However, the road projects have faced tendering delays due to land and statutory clearance issues.
Breaking down the ₹90,000 crore backlog
RVNL currently holds a substantial total order book of over ₹90,000 crore, providing revenue visibility of about 4 years, based on the TTM of ₹20,026 crore. This order book comprises Legacy orders (₹43,000 crore) and Bidding orders (₹46,000 crore). Management anticipates an order inflow of ₹6,000-8,000 crore in H2 FY26.
In terms of bidding order, the order composition includes railway projects (33%), metro sector (22%), BharatNet (12%), roads (10%), and Vande Bharat manufacturing (10%). Additionally, it has an international order book of about ₹3,200 crore, with active execution in the Maldives and bidding activities across Central Asia, the Middle East, and Eastern Europe.
The management has maintained a revenue guidance of ₹21,000-22,000 crore in FY26. While the H1 was relatively flat (₹9,032 crore) compared to the previous year, execution is expected to accelerate significantly in Q3 and Q4 following the end of the extended monsoon season. The diversification is also shifting its margin profile. PAT declined 28.5% to ₹365 crore.
Navigating competitive bidding pressures
This was due to lower margins than the historical 5.5-6% range. This is because 30% of the revenue is now derived from bidding projects, which generally command lower margins than the fixed-fee legacy nomination projects. Consequently, they expect to maintain EBITDA margins of 4% to 5% going forward.
#3 IRCON International
IRCON International (IRCON) is an infrastructure player in India, currently designated as a PSU. It specializes in transport infrastructure, including a wide range of projects such as railways, highways, bridges, tunnels, and electrical works.
The ₹23,865 crore order book
As of 30 September, 2025, Ircon’s order book stands at ₹23,865 crore, providing revenue visibility of about 2 years, based on the TTM of ₹9,788 crore. The majority of orders are in the Railways sector (75%), followed by Highways (19%) and others (6%). The order book is predominantly domestic (91%), with international projects comprising (9%).
The management has provided clear guidance regarding revenue and profitability for the near future. Despite a challenging H1, IRCON aims to achieve a revenue of around ₹10,000 crore in FY26. The management maintains a similar revenue of about ₹ 10,000 crore for FY27.
The company’s operating revenue declined by 20.5% to ₹3,763 crore for H1FY26. EBITDA declined by about 11% to ₹621 crore in H1FY26, still margins expanded to 16.5% from 14.8%. PAT, however, declined by 30% to ₹301 crore. That said, margins in the domestic business have been compressed by competitive pressures and losses in subsidiaries.
The critical role of high-margin international contracts
That is offset by higher margins in international projects. This is attributed to a strategic decision to accept projects with stiffer margins to take orders amidst intense market competition. To combat competition, IRCON is diversifying into new segments, including Kavach and hydro power projects.
The Chhattisgarh East Railway project is currently incurring losses because local mines have not fully developed. However, management expects this venture to break even in 18 to 20 months following the completion of a spur line and subsequent traffic enhancement.
The Valuation Trap: P/E Ratios vs. Historical Medians
Return ratios, especially Return on Capital Employed (ROCE) and Return on Equity (ROE) remain moderate. Even then, all these companies trade at elevated multiples not only relative to their own historical median but also relative to the industry median. This is due to the sharp re-rating seen during the 2023-2024 period. Titagarh’s valuation is only slightly above the historical and industry medians.
| Peer Comparison (X) | |||||
| Company | P/E | 5Y Median P/E | Industry Median P/E | ROCE (%) | ROE (%) |
| Titagarh | 53.4 | 45.3 | 50.0 | 16.6 | 11.6 |
| RVNL | 59.0 | 18.2 | 17.2 | 14.7 | 14.0 |
| IRCON | 24.2 | 13.4 | 11.6 | 11.3 | |
While the order book remains strong, revenue growth is subdued. Additionally, while budgetary allocation is expected to remain high, order allocation is low due to sectoral constraints. This also suggests that a major government-led capital expenditure push has been behind, with a focus on shifting to reviving consumption. While that may not be great news for the railway sector, it will not be bad either as the overall budgetary support has increased quite rapidly over the years.
Disclaimer
Note: Throughout this article, we have relied on data from http://www.Screener.in and the company’s investor presentation. Only in cases where the data was not available have we used an alternate but widely used and accepted source of information.
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About the Author: Madhvendra has been deeply immersed in the equity markets for over seven years, combining his passion for investing with his expertise in financial writing. With a knack for simplifying complex concepts, he enjoys sharing his honest perspectives on startups, listed Indian companies, and macroeconomic trends.
A dedicated reader and storyteller, Madhvendra thrives on uncovering insights that inspire his audience to deepen their understanding of the financial world.
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